Investor Relations

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ARLINGTON, Va.--(BUSINESS WIRE)--Feb. 20, 2015--
Graham Holdings Company (NYSE: GHC) today reported net income
attributable to common shares of $1,293.0 million ($195.03 per share)
for the year ended December 31, 2014, compared to $236.0 million ($32.05
per share) for the year ended December 31, 2013. Net income includes
$372.2 million ($56.15 per share) and $64.0 million ($8.69 per share) in
income from discontinued operations for 2014 and 2013,
respectively. Income from continuing operations attributable to common
shares was $920.7 million ($138.88 per share) for 2014, compared to
$172.0 million ($23.36 per share) for 2013. For the fourth quarter of
2014, the Company reported net income attributable to common shares of
$334.4 million ($57.41 per share), compared to $156.5 million ($21.14
per share) for the same period of 2013. Net income includes $2.3 million
($0.40 per share) and $106.3 million ($14.37 per share) in income from
discontinued operations for the fourth quarter of 2014 and 2013,
respectively. The Company reported income from continuing operations
attributable to common shares of $332.1 million ($57.01 per share) for
the fourth quarter of 2014, compared to $50.1 million ($6.77 per share)
for the same period of 2013. (Refer to "Discontinued Operations"
discussion below.)

In connection with the Berkshire exchange transaction that closed on
June 30, 2014, the Company acquired 1,620,190 shares of its Class B
common stock, resulting in 11% and 21% fewer diluted shares outstanding
in 2014 and the fourth quarter of 2014, respectively, versus the same
periods in 2013.

The results for 2014 and 2013 were affected by a number of items as
described in the following paragraphs. Excluding these items, income
from continuing operations attributable to common shares was $254.4
million ($38.40 per share) for 2014, compared to $215.8 million ($29.34
per share) for 2013. Excluding these items, income from continuing
operations attributable to common shares was $100.8 million ($17.31 per
share) for the fourth quarter of 2014, compared to $74.8 million ($10.13
per share) for the fourth quarter of 2013. (Refer to the Non-GAAP
Financial Information schedule attached to this release for additional
details.)

Items included in the Company’s income from continuing operations for
2014 are listed below, and fourth quarter activity, if any, is
highlighted for each item:

$31.6 million in early retirement program expense and related charges,
restructuring charges and software asset write-offs at the education
division and the corporate office (after-tax impact of $20.2 million,
or $3.05 per share); $3.0 million of these charges were recorded in
the fourth quarter (after-tax impact of $1.9 million, or $0.33 per
share);

$17.3 million in fourth quarter noncash intangible and other
long-lived assets impairment charges at Kaplan and Other Businesses
(after-tax impact of $11.2 million, or $1.69 per share);

$396.6 million fourth quarter gain from the sale of Classified
Ventures (after-tax impact of $249.8 million, or $37.68 per share);

$90.9 million gain from the Classified Ventures’ sale of
apartments.com (after-tax impact of $58.2 million, or $8.78 per share);

$266.7 million gain from the Berkshire exchange transaction (after-tax
impact of $266.7 million, or $40.23 per share);

$127.7 million gain on the sale of the corporate headquarters building
(after-tax impact of $81.8 million, or $12.34 per share);

$75.2 million gain from the sale of wireless licenses at the cable
division (after-tax impact of $48.2 million, or $7.27 per share); and

$11.1 million in non-operating unrealized foreign currency losses
(after-tax impact of $7.1 million, or $1.08 per share); $8.5 million
in losses were recorded in the fourth quarter (after-tax impact of
$5.5 million, or $0.94 per share).

Items included in the Company’s income from continuing operations for
2013 are listed below, and fourth quarter activity, if any, is
highlighted for each item:

$36.4 million in severance and restructuring charges at the education
division (after-tax impact of $25.3 million, or $3.46 per share);
$18.1 million of these charges were recorded in the fourth quarter
(after-tax impact of $12.2 million, or $1.66 per share);

a fourth quarter $10.4 million write-down of a marketable equity
security (after-tax impact of $6.7 million, or $0.91 per share); and

$13.4 million in non-operating unrealized foreign currency losses
(after-tax impact of $8.6 million, or $1.17 per share); $4.0 million
in losses were recorded in the fourth quarter (after-tax impact of
$2.6 million, or $0.35 per share).

Revenue for 2014 was $3,535.2 million, up 4% from $3,407.9 million in
2013. Revenues increased at the television broadcasting division and in
other businesses, offset by a small decline at the cable and education
divisions. Operating income for 2014 increased to $407.9 million, from
$319.2 million in 2013. Operating results improved at all reporting
segments and benefited from an increase in the net pension credit.

For the fourth quarter of 2014, revenue was $925.3 million, up 7% from
$867.2 million in 2013. Revenues increased at the television
broadcasting division and in other businesses, were flat at the
education division and lower at the cable division. The Company reported
operating income of $146.2 million in the fourth quarter of 2014,
compared to $97.4 million in 2013. Operating results improved at all
reporting segments.

On June 30, 2014, the Company and Berkshire Hathaway Inc. completed a
transaction in which Berkshire acquired a wholly-owned subsidiary of the
Company that included, among other things, WPLG, a Miami-based
television station, 2,107 Class A Berkshire shares and 1,278 Class B
Berkshire shares owned by Graham Holdings and $327.7 million in cash, in
exchange for 1,620,190 shares of Graham Holdings Class B common stock
owned by Berkshire Hathaway (Berkshire exchange transaction). As a
result, income from continuing operations for 2014 includes a $266.7
million gain from the exchange of the Berkshire Hathaway shares, and
income from discontinued operations for 2014 includes a $375.0 million
gain from the WPLG exchange.

In November 2014, the Company announced that its Board of Directors
authorized management to proceed with plans for the complete legal and
structural separation of Cable ONE, Inc., a Graham Holdings subsidiary,
from Graham Holdings. Following the proposed transaction, Cable ONE will
be an independent, publicly traded company. The Company intends to
complete the proposed transaction later in 2015. The proposed
transaction will be structured as a tax-free spin-off of Cable ONE to
the stockholders of the Company. The transaction is contingent on the
satisfaction of a number of conditions, including completion of the
review process by the Securities and Exchange Commission of required
filings under applicable securities regulations, other applicable
regulatory approvals and the final approval of transaction terms by the
Company’s Board of Directors.

On February 12, 2015, Kaplan entered into a Purchase and Sale Agreement
with Education Corporation of America (ECA) to sell substantially all of
the assets of its KHE Campuses business, consisting of thirty-eight
nationally accredited ground campuses, and certain related assets, in
exchange for a preferred equity interest in ECA. The transaction is
contingent upon certain regulatory and accrediting agency approvals and
is expected to close in the second or third quarter of 2015.

Division Results

Education

Education division revenue in 2014 totaled $2,160.4 million, compared to
revenue of $2,163.7 million in 2013. For the fourth quarter of 2014,
education division revenue totaled $551.4 million, compared to revenue
of $550.6 million for the same period of 2013.

Kaplan reported operating income of $65.5 million for 2014, compared to
$51.0 million in 2013; Kaplan reported operating income for the fourth
quarter of 2014 of $33.4 million, compared to $14.4 million in the
fourth quarter of 2013. Kaplan’s 2014 operating results in comparison to
2013 benefited from improvement in Kaplan Higher Education (KHE) and
Kaplan International results, offset by increased intangible and other
long-lived asset impairment charges.

In recent years, Kaplan has formulated and implemented restructuring
plans at its various businesses that have resulted in significant costs
in 2014 and 2013, with the objective of establishing lower cost levels
in future periods. Across all businesses, restructuring costs and
software asset write-offs totaled $16.8 million in 2014 and $36.4
million in 2013. Restructuring costs totaled $3.0 million in the fourth
quarter of 2014 and $18.1 million in the fourth quarter of 2013. (Refer
to the Education Division Information, Summary of Restructuring Charges
schedule attached to this release for additional details.)

In the third quarter of 2014, Kaplan completed the sale of three of its
schools in China that were previously part of Kaplan International. The
sale of an additional school in China was completed in January 2015.
Kaplan’s operating results exclude these schools, which have been
reclassified to discontinued operations for all periods presented.

A summary of Kaplan’s operating results, including and excluding
restructuring costs and software asset write-offs, is as follows:

Three Months Ended

Twelve Months Ended

December 31

December 31

(in thousands)

2014

2013

% Change

2014

2013

% Change

Revenue

Higher education

$

254,461

$

269,895

(6

)

$

1,010,058

$

1,080,908

(7

)

Test preparation

70,652

61,137

16

304,662

293,201

4

Kaplan international

225,408

218,883

3

840,915

783,588

7

Kaplan corporate and other

1,203

1,494

(19

)

6,094

7,990

(24

)

Intersegment elimination

(343

)

(791

)

—

(1,312

)

(1,953

)

—

$

551,381

$

550,618

—

$

2,160,417

$

2,163,734

—

Operating Income (Loss)

Higher education

$

43,582

$

29,230

49

$

83,069

$

71,584

16

Test preparation

(1,178

)

(3,188

)

63

(4,730

)

4,118

—

Kaplan international

28,544

27,952

2

69,153

51,653

34

Kaplan corporate and other

(18,134

)

(33,873

)

46

(57,093

)

(64,948

)

12

Amortization of intangible assets

(2,089

)

(2,422

)

14

(7,738

)

(8,503

)

9

Impairment of intangible and other long-lived assets

(17,203

)

(3,250

)

—

(17,203

)

(3,250

)

—

Intersegment elimination

(109

)

(46

)

—

5

335

—

$

33,413

$

14,403

—

$

65,463

$

50,989

28

Operating Income (Loss)

Restructuring Costs Excluded from Divisions

Higher education*

$

45,587

$

34,640

32

$

89,564

$

91,128

(2

)

Test preparation*

(328

)

(3,188

)

90

3,999

4,118

(3

)

Kaplan international*

28,622

29,617

(3

)

69,380

57,425

21

Kaplan corporate and other*

(18,099

)

(22,831

)

21

(55,738

)

(53,906

)

(3

)

55,782

38,238

46

107,205

98,765

9

Restructuring costs*

(2,968

)

(18,117

)

84

(16,806

)

(36,358

)

54

Amortization of intangible assets

(2,089

)

(2,422

)

14

(7,738

)

(8,503

)

9

Impairment of intangible and other long-lived assets

(17,203

)

(3,250

)

—

(17,203

)

(3,250

)

—

Intersegment elimination

(109

)

(46

)

—

5

335

—

$

33,413

$

14,403

—

$

65,463

$

50,989

28

*Non-GAAP Measure

KHE includes Kaplan’s domestic postsecondary education businesses, made
up of fixed-facility colleges and online postsecondary and career
programs. KHE also includes the domestic professional training and other
continuing education businesses.

In 2012, KHE began implementing plans to close or merge 13 ground
campuses, consolidate other facilities and reduce its workforce. The
last two of these campus closures were completed in the second quarter
of 2014. In April 2014, KHE announced plans to close two additional
ground campuses, and in July 2014, KHE announced plans to close another
three campuses. KHE is in the process of teaching out the current
students, and the campus closures will be completed by the end of 2015.
In July 2014, KHE also announced plans to further reduce its work force.

In February 2015, Kaplan entered into a Purchase and Sale Agreement with
ECA to sell substantially all of the assets of its KHE Campuses
business. The transaction is contingent upon certain regulatory and
accrediting agency approvals and is expected to close in the second or
third quarter of 2015. In addition, in the fourth quarter of 2014,
Kaplan recorded a $13.6 million other long-lived asset impairment charge
in connection with its KHE Campuses business. KHE results include
revenue and operating income (loss) related to the KHE Campuses business
as follows:

Three Months Ended

Twelve Months Ended

December 31

December 31

(in thousands)

2014

2013

2014

2013

Revenue

$

67,355

$

75,712

$

274,487

$

299,714

Operating income (loss)

$

1,330

$

(804

)

$

(12,500

)

$

(28,343

)

In connection with these and other plans, KHE incurred $6.5 million and
$19.5 million in restructuring costs from severance, accelerated
depreciation, lease obligations and other items in 2014 and 2013,
respectively; $2.0 million and $5.4 million of these restructuring costs
were recorded in the fourth quarter of 2014 and 2013, respectively.

In 2014 and the fourth quarter of 2014, KHE revenue declined 7% and 6%,
respectively, due largely to declines in average enrollments at KHE
campuses and at Kaplan University that reflect weaker market demand over
the past year and lower average tuition. The declines were most
pronounced at KHE’s ground campuses due to the impact of campuses closed
or in the process of closing, as well as weakness in demand for KHE’s
non-degree vocational programs. KHE operating income improved in 2014
and the fourth quarter of 2014 due largely to expense reductions
associated with lower enrollments and recent restructuring efforts and
lower restructuring costs, partially offset by revenue declines and
increased marketing spending at Kaplan University.

New student enrollments at KHE declined 3% in 2014 due to lower demand
across KHE and the impact of campus closures. Total students at
December 31, 2014, were down 6% and 8% compared to December 31, 2013,
and September 30, 2014. Excluding campuses closed or planned for
closure, total students at December 31, 2014, were down 4% and 8%
compared to December 31, 2013, and September 30, 2014, respectively. A
summary of student enrollments is as follows:

Excluding Campuses Closing

As of

As of

December 31,

September 30,

December 31,

December 31,

September 30,

December 31,

2014

2014

2013

2014

2014

2013

Kaplan University

42,469

46,342

42,816

42,469

46,342

42,816

Other Campuses

14,266

15,570

17,417

14,045

15,139

15,818

56,735

61,912

60,233

56,514

61,481

58,634

Kaplan University and Other Campuses enrollments by certificate and
degree programs, are as follows:

As of December 31

2014

2013

Certificate

20.6

%

21.7

%

Associate’s

27.4

%

29.7

%

Bachelor’s

34.2

%

32.3

%

Master’s

17.8

%

16.3

%

100.0

%

100.0

%

KTP includes Kaplan’s standardized test preparation programs. KTP
revenue increased 4% in 2014 and 16% for the fourth quarter of 2014.
Excluding revenues from acquired businesses, KTP revenue increased 2% in
2014 and 11% for the fourth quarter of 2014. KTP recorded a $7.7 million
software asset write-off in the second quarter of 2014 due to a decision
to consolidate certain learning management systems. KTP operating
results declined in 2014 due to the software asset write-off and
increased costs for newly acquired businesses. Operating results in the
fourth quarter of 2014 improved due to revenue growth.

Kaplan International includes English-language programs and
postsecondary education and professional training businesses largely
outside the United States. Kaplan International revenue increased 7% in
2014 due to enrollment growth in the pathways, English-language,
Australia professional and Singapore higher education programs. Kaplan
International revenue grew 3% in the fourth quarter of 2014 due to
growth in the pathways, English-language, Australia Professional and
Singapore higher education programs, offset by weaker currency exchange
rates in Europe and Australia.

Kaplan International operating income increased 34% in 2014 due
primarily to improved results from operations in Australia and
Singapore, and lower restructuring costs in 2014. Restructuring costs at
Kaplan International totaled $0.2 million and $5.8 million in 2014 and
2013, respectively. Operating results were up in the fourth quarter of
2014 due to improved results in Australia and lower restructuring costs,
offset by higher costs to support growth in English-language programs.
Restructuring costs were $0.1 million and $1.7 million in the fourth
quarter of 2014 and 2013, respectively.

In the fourth quarter of 2014, Kaplan recorded $17.2 million in noncash
intangible and other long-lived assets impairment charges in connection
with businesses at KHE, KTP and Kaplan International. In 2013, Kaplan
recorded $3.3 million in noncash intangible assets impairment charges
primarily in connection with one of the businesses in Kaplan
International.

Kaplan corporate represents unallocated expenses of Kaplan, Inc.’s
corporate office, other minor businesses and certain shared activities.
In the fourth quarter of 2013, $11.0 million in restructuring costs was
recorded in connection with charges related to office space managed by
Kaplan corporate.

Kaplan continues to evaluate its cost structure and is pursuing
additional cost savings opportunities, including eliminating excess
office capacity. This will likely result in additional restructuring
plans and related costs in 2015.

Cable

Cable division revenue for 2014 declined 1% to $798.1 million, from
$807.3 million in 2013 due to 4% fewer customers and 8% fewer Primary
Service Units (PSUs); revenue totaled $197.7 million for the fourth
quarter of 2014, a 1% decline from $200.2 million for the fourth quarter
of 2013. Operating expenses in 2014 declined 3%, from $637.6 million to
$619.4 million in 2014; operating expenses declined 3% in the fourth
quarter of 2014, from $151.5 million to $147.0 million. The expense
declines are due to fewer customers and significantly reduced
programming costs. Cable division operating income grew 5% to $178.7
million, from $169.7 million in 2013; operating income increased 4% from
$48.7 million in the fourth quarter of 2013 to $50.7 million in the
fourth quarter of 2014.

The cable division continues its focus on higher margin businesses,
namely high-speed data and business sales. Residential high-speed data
revenue increased 5.3% in 2014 on 2.5% customer growth, and business
sales increased 18.5% on a 14.9% increase in business high-speed data
customers. Overall, business sales comprised 8.9% of total revenue for
2014, compared with 7.4% of total revenue for 2013. Due to rapidly
rising programming costs and shrinking margins, video sales now have
less value and emphasis (video PSUs were down 16% from 2013) and
programming costs have been reduced significantly. Effective April 1,
2014, the cable division elected not to renew its contract for Viacom
networks.

The cable division also continues to focus on higher lifetime value
customers who are less attracted by discounting, require less support
and churn less. Operating income margins increased to 22.4% in 2014,
from 21.0% in 2013.

A summary of PSUs and total customers is as follows:

As of December 31

2014

2013

Video

451,217

538,894

High-speed data

488,454

472,631

Voice

149,513

169,181

Total Primary Service Units (PSUs)

1,089,184

1,180,706

Total Customers

686,671

712,910

In July 2014, the cable division sold wireless spectrum licenses for
$98.8 million; a pre-tax gain of $75.2 million was reported in the third
quarter of 2014 in connection with these sales. The licenses had been
purchased in the 2006 AWS auction.

Television Broadcasting

Revenue for the television broadcasting division increased 18% to $363.8
million in 2014, from $308.3 million in 2013; operating income for 2014
was up 29% to $187.8 million, from $145.2 million in 2013. The increase
in revenue and operating income is due to a $31.8 million increase in
political advertising revenue, $9.5 million in incremental winter
Olympics-related advertising revenue at the Company’s NBC affiliates and
$18.6 million in increased retransmission revenues.

For the fourth quarter of 2014, revenue increased 20% to $102.4 million,
from $85.7 million in 2013; operating income for the fourth quarter of
2014 was up 24% to $54.4 million, from $44.0 million in the same period
of 2013. The increase in revenue and operating income is due to a $15.4
million increase in political advertising revenue and $4.6 million in
increased retransmission revenues.

In November 2014, the television broadcasting division acquired
SocialNewsDesk, a market-leading software-based technology platform
created by journalists to help newsroom and content producers publish,
manage and monetize social media.

As a result of the Berkshire exchange transaction discussed above, the
television broadcasting operating results exclude WPLG, the Company’s
Miami-based television station, which has been reclassified to
discontinued operations for all periods presented.

Other Businesses

Other businesses includes the operating results of The Slate Group and
Foreign Policy Group, which publish online and print magazines and
websites; SocialCode, a marketing solutions provider helping companies
with marketing on social-media platforms; Celtic Healthcare, a provider
of home health and hospice services; Forney, a global supplier of
products and systems that control and monitor combustion processes in
electric utility and industrial applications, acquired by the Company in
August 2013; and Trove, a digital innovation team that builds products
and technologies in the news space. Other businesses also includes a
number of businesses acquired in 2014.

In April 2014, Celtic Healthcare acquired the assets of VNA-TIP
Healthcare of Bridgeton, MO. This acquisition has expanded Celtic’s home
health and hospice service areas from Pennsylvania and Maryland to the
Missouri and Illinois regions. The operating results of VNA-TIP are
included in other businesses from the date of acquisition in the second
quarter of 2014. In January 2015, Celtic Healthcare and Allegheny Health
Network (AHN) closed on the formation of a joint venture to combine each
other’s home health and hospice assets in the western Pennsylvania
region. Although Celtic will manage the operations of the joint venture,
Celtic holds a 40% interest in the joint venture, so the operating
results of the joint venture will not be consolidated and the pro rata
operating results will be included in the Company’s equity in earnings
of affiliates in the future. Celtic's revenues from the western
Pennsylvania region that now are part of the joint venture made up 29%
of total Celtic revenues in 2014.

On May 30, 2014, the Company acquired Joyce/Dayton Corp., a Dayton,
OH-based manufacturer of screw jacks and other linear motion systems.
The operating results of Joyce/Dayton are included in other businesses
from the date of acquisition in the second quarter of 2014.

On July 3, 2014, the Company acquired a majority interest in Residential
Healthcare Group, Inc. (Residential), the parent company of Residential
Home Health and Residential Hospice, leading providers of skilled home
health and hospice services in Michigan and Illinois. The operating
results of Residential are included in Other Businesses from the date of
acquisition in the third quarter of 2014. Since Residential owns a
minority interest in the Illinois operations it manages, the operating
results of the Illinois operations are not being consolidated and the
pro rata operating results are included in the Company’s equity in
earnings of affiliates.

The increase in revenues for 2014 and the fourth quarter of 2014 is due
primarily to the inclusion of revenues from the businesses acquired in
2014 and 2013. The improvement in operating results in 2014 and the
fourth quarter of 2014 reflects the contribution of the acquired
businesses, as well as improved results at SocialCode. These
improvements were partially offset by acquisition-related costs and
other integration expenses incurred in conjunction with the VNA-TIP
Healthcare acquisition.

Corporate Office

Corporate office includes the expenses of the Company’s corporate
office, the pension credit for the Company’s traditional defined benefit
plan and certain continuing obligations related to prior business
dispositions. In the first quarter of 2014, the corporate office
implemented a Separation Incentive Program that resulted in early
retirement program expense of $4.5 million, which is being funded from
the assets of the Company’s pension plan. In the third quarter of 2014,
the acceptance period for the Voluntary Retirement Incentive Program
(VRIP) ended and the Company recorded $10.3 million in early retirement
program expense and other related charges, a portion of which is being
funded from the assets of the Company’s pension plan. Excluding early
retirement program expense, the total pension credit for the Company’s
traditional defined benefit plan was $91.2 million and $42.7 million for
2014 and 2013, respectively.

Excluding the pension credit, early retirement program expense and other
related charges, corporate office expenses increased in 2014 due to
higher compensation costs, expenses related to acquisitions, the
Berkshire exchange transaction and the cable spin-off, and incremental
costs associated with the corporate office headquarters move to
Arlington, VA.

Equity in Earnings of Affiliates

At September 30, 2014, the Company held a 16.5% interest in Classified
Ventures, LLC (CV) and interests in several other affiliates. On October
1, 2014, the Company and the remaining partners in CV completed the sale
of their entire stakes in CV. Total proceeds to the Company, net of
transaction costs, were $408.5 million, of which $16.5 million will be
held in escrow until October 1, 2015. The Company recorded a pre-tax
non-operating gain of $396.6 million in connection with the sale in the
fourth quarter of 2014.

The Company’s equity in earnings of affiliates, net, for 2014 was $100.4
million, compared to $13.2 million in 2013. For the fourth quarter of
2014, the Company’s equity in earnings of affiliates was $0.2 million
and was insignificant for the fourth quarter of 2013.

The 2014 results include a pre-tax gain of $90.9 million from Classified
Ventures’ sale of apartments.com in the second quarter of 2014.

Other Non-Operating Income (Expense)

The Company recorded other non-operating income, net, of $853.3 million
in 2014, compared to expense of $23.8 million in 2013. For the fourth
quarter of 2014, the Company recorded other non-operating income, net,
of $387.3 million, compared to expense of $14.9 million for the fourth
quarter of 2013.

The 2014 non-operating income, net, included a fourth quarter pre-tax
gain of $396.6 million on the sale of Classified Ventures, the pre-tax
gain of $266.7 million in connection with the Company’s exchange of
Berkshire shares, a pre-tax gain of $127.7 million on the sale of the
headquarters building, a $75.2 million pre-tax gain on the sale of
wireless licenses, $11.1 million in unrealized foreign currency losses
($8.5 million in unrealized foreign currency losses in the fourth
quarter) and other items. The 2013 non-operating expense, net, included
a $10.4 million fourth quarter write-down of a marketable equity
security, $13.4 million in unrealized foreign currency losses ($4.0
million in unrealized foreign currency losses in the fourth quarter) and
other items.

Net Interest Expense and Related Balances

The Company incurred net interest expense of $34.5 million in 2014,
compared to $33.8 million in 2013; net interest expense totaled $9.5
million and $8.2 million for the fourth quarters of 2014 and 2013,
respectively. At December 31, 2014, the Company had $445.9 million in
borrowings outstanding at an average interest rate of 7.1%, and cash,
marketable securities and other investments of $1,024.4 million. At
December 31, 2013, the Company had $450.8 million in borrowings
outstanding at an average interest rate of 7.0%, and cash, marketable
securities and other investments of $1,175.8 million.

Provision for Income Taxes

The effective tax rate for income from continuing operations in 2014 was
30.6%. The lower effective tax rate in 2014 largely relates to the
Berkshire exchange transaction. The pre-tax gain of $266.7 million
related to the disposition of the Berkshire shares was not subject to
income tax as the exchange qualifies as a tax-free transaction.

The effective tax rate for income from continuing operations in 2013 was
36.9%. This effective tax rate benefited from lower state taxes and
lower rates in jurisdictions outside the United States, offset by $4.6
million in net state and non-U.S. valuation allowances provided against
deferred income tax benefits where realization is doubtful.

Discontinued Operations

On June 30, 2014, the Company and Berkshire Hathaway Inc. completed the
Berkshire exchange transaction discussed above. A gain of $375.0 million
was recorded in discontinued operations in connection with the
disposition of WPLG, a Miami-based television station. This gain is not
subject to income tax.

In the third quarter of 2014, Kaplan completed the sale of three of its
schools in China that were previously part of Kaplan International. An
additional school in China was sold by Kaplan in January 2015.

On October 1, 2013, the Company completed the sale of its newspaper
publishing businesses for $250.0 million. The related publishing
businesses sold include The Washington Post, Express, The Gazette
Newspapers, Southern Maryland Newspapers, Greater Washington Publishing,
Fairfax County Times, El Tiempo Latino and related websites (Publishing
Subsidiaries). In the fourth quarter of 2013, a pre-tax gain of $157.5
million was recorded in discontinued operations on the sale ($100.0
million after-tax gain).

In March 2013, the Company sold The Herald, a daily newspaper
headquartered in Everett, WA.

As a result of these transactions, income from continuing operations
excludes the operating results and related net gain on dispositions of
these businesses, which have been reclassified to discontinued
operations, net of tax, for all periods presented.

Earnings Per Share

The calculation of diluted earnings per share for 2014 and the fourth
quarter of 2014 was based on 6,559,442 and 5,769,889 weighted average
shares, respectively, compared to 7,332,508 and 7,347,267 weighted
average shares, respectively, for 2013 and the fourth quarter of 2013.
At December 31, 2014, there were 5,798,789 shares outstanding and the
Company had remaining authorization from the Board of Directors to
repurchase up to 159,219 shares of Class B common stock. The earnings
per share computations for the year and fourth quarter of 2014 were
favorably impacted by the 1,620,190 common shares repurchased as part of
the Berkshire exchange transaction.

Forward-Looking Statements

This report contains certain forward-looking statements that are based
largely on the Company’s current expectations. Forward-looking
statements are subject to certain risks and uncertainties that could
cause actual results and achievements to differ materially from those
expressed in the forward-looking statements. For more information about
these forward-looking statements and related risks, please refer to the
section titled “Forward-Looking Statements” in Part I of the Company’s
Annual Report on Form 10-K.

GRAHAM HOLDINGS COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended

December 31

%

(in thousands, except per share amounts)

2014

2013

Change

Operating revenues

$

925,343

$

867,242

7

Operating expenses

711,202

704,285

1

Depreciation of property, plant and equipment

45,366

58,924

(23

)

Amortization of intangible assets

5,251

3,359

56

Impairment of intangible and other long-lived assets

17,302

3,250

—

Operating income

146,222

97,424

50

Equity in earnings of affiliates, net

202

37

—

Interest income

367

590

(38

)

Interest expense

(9,879

)

(8,838

)

12

Other income (expense), net

387,346

(14,920

)

—

Income from continuing operations before income taxes

524,258

74,293

—

Provision for income taxes

191,900

24,100

—

Income from continuing operations

332,358

50,193

—

Income from discontinued operations, net of tax

2,308

106,335

(98

)

Net income

334,666

156,528

—

Net income attributable to noncontrolling interests

(256

)

(55

)

—

Net income attributable to Graham Holdings Company

334,410

156,473

—

Redeemable preferred stock dividends

—

—

—

Net Income Attributable to Graham Holdings Company Common
Stockholders

$

334,410

$

156,473

—

Amounts Attributable to Graham Holdings Company Common
Stockholders

Income from continuing operations

$

332,102

$

50,138

—

Income from discontinued operations, net of tax

2,308

106,335

(98

)

Net income

$

334,410

$

156,473

—

Per Share Information Attributable to Graham Holdings Company
Common Stockholders

Basic income per common share from continuing operations

$

57.31

$

6.79

—

Basic income per common share from discontinued operations

0.40

14.41

(97

)

Basic net income per common share

$

57.71

$

21.20

—

Basic average number of common shares outstanding

5,678

7,266

Diluted income per common share from continuing operations

$

57.01

$

6.77

—

Diluted income per common share from discontinued operations

0.40

14.37

(97

)

Diluted net income per common share

$

57.41

$

21.14

—

Diluted average number of common shares outstanding

5,770

7,347

GRAHAM HOLDINGS COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Twelve Months Ended

December 31

%

(in thousands, except per share amounts)

2014

2013

Change

Operating revenues

$

3,535,166

$

3,407,911

4

Operating expenses

2,887,918

2,843,998

2

Depreciation of property, plant and equipment

203,646

229,355

(11

)

Amortization of intangible assets

18,368

12,139

51

Impairment of intangible and other long-lived assets

17,302

3,250

—

Operating income

407,932

319,169

28

Equity in earnings of affiliates, net

100,370

13,215

—

Interest income

2,136

2,264

(6

)

Interest expense

(36,586

)

(36,067

)

1

Other income (expense), net

853,259

(23,751

)

—

Income from continuing operations before income taxes

1,327,111

274,830

—

Provision for income taxes

406,100

101,500

—

Income from continuing operations

921,011

173,330

—

Income from discontinued operations, net of tax

372,249

64,015

—

Net income

1,293,260

237,345

—

Net loss (income) attributable to noncontrolling interests

583

(480

)

—

Net income attributable to Graham Holdings Company

1,293,843

236,865

—

Redeemable preferred stock dividends

(847

)

(855

)

(1

)

Net Income Attributable to Graham Holdings Company Common
Stockholders

$

1,292,996

$

236,010

—

Amounts Attributable to Graham Holdings Company Common
Stockholders

Income from continuing operations

$

920,747

$

171,995

—

Income from discontinued operations, net of tax

372,249

64,015

—

Net income

$

1,292,996

$

236,010

—

Per Share Information Attributable to Graham Holdings Company
Common Stockholders

Basic income per common share from continuing operations

$

139.44

$

23.39

—

Basic income per common share from discontinued operations

56.37

8.71

—

Basic net income per common share

$

195.81

$

32.10

—

Basic average number of common shares outstanding

6,470

7,238

Diluted income per common share from continuing operations

$

138.88

$

23.36

—

Diluted income per common share from discontinued operations

56.15

8.69

—

Diluted net income per common share

$

195.03

$

32.05

—

Diluted average number of common shares outstanding

6,559

7,333

GRAHAM HOLDINGS COMPANY

BUSINESS SEGMENT INFORMATION

(Unaudited)

Three Months Ended

Twelve Months Ended

December 31

%

December 31

%

(in thousands)

2014

2013

Change

2014

2013

Change

Operating Revenues

Education

$

551,381

$

550,618

—

$

2,160,417

$

2,163,734

—

Cable

197,718

200,240

(1

)

798,134

807,309

(1

)

Television broadcasting

102,446

85,688

20

363,836

308,306

18

Other businesses

73,798

30,735

—

212,907

128,803

65

Corporate office

—

—

—

—

—

—

Intersegment elimination

—

(39

)

—

(128

)

(241

)

—

$

925,343

$

867,242

7

$

3,535,166

$

3,407,911

4

Operating Expenses

Education

$

517,968

$

536,215

(3

)

$

2,094,954

$

2,112,745

(1

)

Cable

147,010

151,543

(3

)

619,412

637,574

(3

)

Television broadcasting

48,066

41,689

15

176,003

163,114

8

Other businesses

67,850

34,647

96

233,993

152,271

54

Corporate office

(1,773

)

5,763

—

3,000

23,279

(87

)

Intersegment elimination

—

(39

)

—

(128

)

(241

)

—

$

779,121

$

769,818

1

$

3,127,234

$

3,088,742

1

Operating Income (Loss)

Education

$

33,413

$

14,403

—

$

65,463

$

50,989

28

Cable

50,708

48,697

4

178,722

169,735

5

Television broadcasting

54,380

43,999

24

187,833

145,192

29

Other businesses

5,948

(3,912

)

—

(21,086

)

(23,468

)

10

Corporate office

1,773

(5,763

)

—

(3,000

)

(23,279

)

87

$

146,222

$

97,424

50

$

407,932

$

319,169

28

Depreciation

Education

$

14,713

$

28,104

(48

)

$

61,737

$

89,622

(31

)

Cable

26,748

27,541

(3

)

128,733

128,184

—

Television broadcasting

2,228

2,142

4

8,409

8,746

(4

)

Other businesses

1,430

616

—

3,931

2,177

81

Corporate office

247

521

(53

)

836

626

34

$

45,366

$

58,924

(23

)

$

203,646

$

229,355

(11

)

Amortization of Intangible Assets and Impairment of Intangible
and Other Long-Lived Assets

Education

$

19,292

$

5,672

—

$

24,941

$

11,753

—

Cable

36

52

(31

)

181

220

(18

)

Television broadcasting

32

—

—

32

—

—

Other businesses

3,193

885

—

10,516

3,416

—

Corporate office

—

—

—

—

—

—

$

22,553

$

6,609

—

$

35,670

$

15,389

—

Pension Expense (Credit)

Education

$

3,855

$

4,032

(4

)

$

15,418

$

16,538

(7

)

Cable

916

940

(3

)

3,585

3,708

(3

)

Television broadcasting

338

70

—

1,355

3,961

(66

)

Other businesses

191

187

2

748

610

23

Corporate office

(23,070

)

(14,287

)

61

(82,301

)

(41,836

)

97

$

(17,770

)

$

(9,058

)

96

$

(61,195

)

$

(17,019

)

—

GRAHAM HOLDINGS COMPANY

EDUCATION DIVISION INFORMATION

(Unaudited)

Three Months Ended

Twelve Months Ended

December 31

%

December 31

%

(in thousands)

2014

2013

Change

2014

2013

Change

Operating Revenues

Higher education

$

254,461

$

269,895

(6

)

$

1,010,058

$

1,080,908

(7

)

Test preparation

70,652

61,137

16

304,662

293,201

4

Kaplan international

225,408

218,883

3

840,915

783,588

7

Kaplan corporate and other

1,203

1,494

(19

)

6,094

7,990

(24

)

Intersegment elimination

(343

)

(791

)

—

(1,312

)

(1,953

)

—

$

551,381

$

550,618

—

$

2,160,417

$

2,163,734

—

Operating Expenses

Higher education

$

210,879

$

240,665

(12

)

$

926,989

$

1,009,324

(8

)

Test preparation

71,830

64,325

12

309,392

289,083

7

Kaplan international

196,864

190,931

3

771,762

731,935

5

Kaplan corporate and other

19,337

35,367

(45

)

63,187

72,938

(13

)

Amortization of intangible assets

2,089

2,422

(14

)

7,738

8,503

(9

)

Impairment of intangible and other long-lived assets

17,203

3,250

—

17,203

3,250

—

Intersegment elimination

(234

)

(745

)

—

(1,317

)

(2,288

)

—

$

517,968

$

536,215

(3

)

$

2,094,954

$

2,112,745

(1

)

Operating Income (Loss)

Higher education

$

43,582

$

29,230

49

$

83,069

$

71,584

16

Test preparation

(1,178

)

(3,188

)

63

(4,730

)

4,118

—

Kaplan international

28,544

27,952

2

69,153

51,653

34

Kaplan corporate and other

(18,134

)

(33,873

)

46

(57,093

)

(64,948

)

12

Amortization of intangible assets

(2,089

)

(2,422

)

14

(7,738

)

(8,503

)

9

Impairment of intangible and other long-lived assets

(17,203

)

(3,250

)

—

(17,203

)

(3,250

)

—

Intersegment elimination

(109

)

(46

)

—

5

335

—

$

33,413

$

14,403

—

$

65,463

$

50,989

28

Depreciation

Higher education

$

7,047

$

9,973

(29

)

$

29,187

$

43,892

(34

)

Test preparation

2,826

4,536

(38

)

12,547

19,194

(35

)

Kaplan international

4,751

4,251

12

19,297

16,154

19

Kaplan corporate and other

89

9,344

(99

)

706

10,382

(93

)

$

14,713

$

28,104

(48

)

$

61,737

$

89,622

(31

)

Pension Expense

Higher education

$

2,629

$

2,899

(9

)

$

10,514

$

11,714

(10

)

Test preparation

722

662

9

2,888

2,674

8

Kaplan international

89

90

(1

)

356

363

(2

)

Kaplan corporate and other

415

381

9

1,660

1,787

(7

)

$

3,855

$

4,032

(4

)

$

15,418

$

16,538

(7

)

GRAHAM HOLDINGS COMPANY

EDUCATION DIVISION INFORMATION

SUMMARY OF RESTRUCTURING CHARGES

(Unaudited)

(in thousands)

Severance

AcceleratedDepreciation

LeaseObligationLosses

SoftwareAssetWrite-offs

Other

Total

Three Months Ended December 31

2014

Higher education

$

511

$

855

$

639

$

—

$

—

$

2,005

Test preparation

850

—

—

—

—

850

Kaplan international

78

—

—

—

—

78

Kaplan corporate and other

35

—

—

—

—

35

$

1,474

$

855

$

639

$

—

$

—

$

2,968

2013

Higher education

$

1,217

$

1,728

$

2,290

$

—

$

175

$

5,410

Test preparation

—

—

—

—

—

—

Kaplan international

580

536

318

—

231

1,665

Kaplan corporate and other

341

9,107

1,594

—

—

11,042

$

2,138

$

11,371

$

4,202

$

—

$

406

$

18,117

Twelve Months Ended December 31

2014

Higher education

$

3,478

$

2,062

$

725

$

—

$

230

$

6,495

Test preparation

1,040

—

—

7,689

—

8,729

Kaplan international

227

—

—

—

—

227

Kaplan corporate and other

330

—

1,025

—

—

1,355

$

5,075

$

2,062

$

1,750

$

7,689

$

230

$

16,806

2013

Higher education

$

4,264

$

7,489

$

6,627

$

—

$

1,164

$

19,544

Test preparation

—

—

—

—

—

—

Kaplan international

1,684

260

1,130

—

2,698

5,772

Kaplan corporate and other

341

9,107

1,594

—

—

11,042

$

6,289

$

16,856

$

9,351

$

—

$

3,862

$

36,358

NON-GAAP FINANCIAL INFORMATION

GRAHAM HOLDINGS COMPANY

(Unaudited)

In addition to the results reported in accordance with accounting
principles generally accepted in the United States (GAAP) included in
this press release, the Company has provided information regarding
income from continuing operations excluding certain items described
below reconciled to the most directly comparable GAAP measures.
Management believes that these non-GAAP measures, when read in
conjunction with the Company’s GAAP financials, provide useful
information to investors by offering:

the ability to make meaningful period-to-period comparisons of the
Company’s ongoing results;

the ability to identify trends in the Company’s underlying business;
and

a better understanding of how management plans and measures the
Company’s underlying business.

Income from continuing operations excluding certain items should not be
considered substitutes or alternatives to computations calculated in
accordance with and required by GAAP. These non-GAAP financial measures
should be read only in conjunction with financial information presented
on a GAAP basis.

The following table reconciles the non-GAAP financial measures to the
most directly comparable GAAP measures: